Fifth wheel financing

[EricRom]

Not trying to be personal about people finances but if anyone would like to share their financing suggestions on financing a new fifth wheel that would be great.
We currently have a 2013 Eagle 314 BDS that we financed for 7 yrs at a payment of $500.00 per month. we are looking to go to either a 2016 Eagle 345BHTS or a North Point 375BHFS and have gotten a very good price on both units. The 345 we would finance @$50,000 with an MSRP of $64,500 ($423/mo 15yrs) and the 375 would be just under $60,000 with an MSRP of @ $84,500 ($505/mo at 15yrs).
Feelings i have about it is on one side i think 15 years is a looonngg time but on the other hand it is the same payment i am paying now (we are leaning towards the 375) and i consider it to be like our vacation home. We do get a lot of use out of it about 8-10 trips a year including a trip or two to the beach for a week at a time.
Your feedback, if you would like to share would be appreciated.
Thanks
Eric

[UPCamper]

I hate financing but we financed ours as well. I was able to get 2.99% from my credit union. We took ours out for much "longer" than we planned, however, we make a higher payment. We did it this way in case anything were to happen we didn't use a bunch of our savings and we could make a small payment if needed.

15 years is a long time. I agree it is like our vacation home as well, but you will never pay off the depreciation. Whereas, with a actual vacation home you build equity. It's completely your decision. I persoanlly wouldn't be opposed if it could be payed off early, but if you fully intend to pay it off over the full term, I would be apprehensive. It depends on the interest rate as well. Good luck!

UPC

[canuckowner]

So that works out to $76,140 & $90,900 respectively. About a third added to the price in interest. So the interest rate must be just under 3% which isn't much more than inflation right now (i.e. a good rate). One other thing to consider in your calculations on how expensive this upgrade will be, is are you carrying any other debt at a higher interest rate that gets paid down slower while you make big trailer payments. If so, add that interest to the price of the trailer, which could easily put the 375bhfs over 100k. You should also make sure there are no penalties for breaking the financing agreement early and repaying the full principle, because the chances of you keeping that trailer 15 years is next to zero. Also, is that financing arrangement an amortization the same as a mortgage where you are basically paying all interest at the beginning? That could really be a shock when you want to sell in 6 years and see that only a small amount of the principle has been repaid. Just a few things to consider if you haven't already thought of it.

Those are all beautiful rigs though, including the one you already own. :-)

[mike837go]

I feel that financing anything beyond 4 years that looses value as fast as an RV should be avoided.


I financed $14K of my new TT for 26 months giving a round payment that I can just afford. So, by the summer of 2017 it will be mine free-and-clear.


The dealer was offering 12 year financing! THAT left the negotiating table very early.

[troutslayer]

Originally Posted by canuckowner

So that works out to $76,140 & $90,900 respectively. About a third added to the price in interest. So the interest rate must be just under 3% which isn't much more than inflation right now (i.e. a good rate). One other thing to consider in your calculations on how expensive this upgrade will be, is are you carrying any other debt at a higher interest rate that gets paid down slower while you make big trailer payments. If so, add that interest to the price of the trailer, which could easily put the 375bhfs over 100k. You should also make sure there are no penalties for breaking the financing agreement early and repaying the full principle, because the chances of you keeping that trailer 15 years is next to zero. Also, is that financing arrangement an amortization the same as a mortgage where you are basically paying all interest at the beginning? That could really be a shock when you want to sell in 6 years and see that only a small amount of the principle has been repaid. Just a few things to consider if you haven't already thought of it.

Those are all beautiful rigs though, including the one you already own. :-)

Thanks for pointing this out. These are things everyone should consider when financing. When you look at a new RV with these figures in mind, it becomes a much more expensive purchase (and possible loss to overall net worth). Cash is the king!

[clubhouse]

Questions regarding personal finance are just that personal. Everyone manages their finances differently, therefore what I would do isn't the only way to handle things. However since you asked, I'll share my opinion...

I would not finance RV for 15 years. That is an incredibly long time for a depreciating asset. How many 15 year old TT/5Rs do you see on the road -- I don't see many.

We all know the depreciation on these things is pretty extreme. From my math it would appear that you will be upside down on this purchase for years and years -- probably 10+ years if you run the full length of the term.

If you are committed to buying and financing I would make three changes to your plan...

1) Buy a late model used unit. This will get the purchase price way down and someone else will have taken the largest initial depreciation hit.

2) Have a considerable down payment, 25% or more. We all know we will lose money
on an RV and accept that because we value the time spent using it. However if you delay this purchase till you have a significant down payment it will provide you a lot more flexibility in the future should you want to trade units again or if something happens to affect your financial position and you need to sell it in order to get out from under it.

3) Don't accept a long loan term to have a lower payment thinking you will just pay it off faster. It would be great if that happened, but we are all human and for some reason even with the best of intentions that doesn't always happen. At the absolute longest, with a 25% or larger down payment, I would suggest a 60 months or shorter term. This should keep you close to even or possibly with positive equity the entire time you have the RV which again will help should you need or want to get out of it.

I have made plenty of bad financial decisions in my life, probably because I didn't have the wisdom you do to ask the community for their thoughts. We have made life decisions to never finance again -- it was a painful 19 months to get out from under all the loans we had, but it’s now been 5 months since we are debt free (except the mortgage on our house) and never have we had better cash flow, security and freedom like we do now. My kids don’t like him, they can’t handle delayed satisfaction yet, but DW and I are very happy we stumbled into the Dave Ramsey plan.

[clubhouse]

Question -- does your 314BDS have equity, or are you rolling negative equity? Sometimes this is hard to figure out, because the dealer simply raises the new RV selling price just enough to increase any trade-in you are getting so it appears they are paying it off and you are starting fresh. However if you are not getting the best price on the new unit because of trade-in valuation -- then essentially you are rolling negative equity.

If you can I would try to sell the 314BDS private party, then negotiate the new trailer separate from any trade-in discussions.

Dealers have the upper hand in these transactions. They do this this hundreds or thousands of times a year, as buyers we might do it 5-10 times in our life.

I would try to reduce as many variables in the transaction as possible.

[EricRom]

It went into the deal backwards as I got a quote from RVOne and took it to a local family owned dealer and they came in within a $1000 of RVOne which I was happy with since it was a lot closer. That being said I brought mind trade into the equation and they gave me ACV (actual cash value) of $16500. With putting $4000 down put me right at 70% of MSRP to finance of the 375 which I didn't think that was too bad of a place to be. I would have no problem doing a 4-5 yr loan on a camper in the mid 20's but at $60k just not doable. The dealer also told me if I sold my unit before the new one came in they would do a courtesy trade so it would save me on taxes and they would only charge the person buying mine doc fees. I know many people spend their money in different ways. Camping is the only thing that we do, I do not have hobbies nor do I drink or have other habits that I spend money on. A friend that we camp with said he would never spend that much money on a camper (they just bought a new one last year for @ $20k) but he spends $250 a month on cigarettes. My wife and have very good jobs, I have been with UPS for 25 years and my wife has been at her job for over 20 yrs as a system engineer. We use our camper at least 8-10 times a year with a trip or two to the beach for a week at a time which in turns saves us a fair amount of money where we used to spend $1500-2000 on a hotel room now we only pay @600 for a campsite at the beach. Thanks for the comments and advice. i will also ask some more questions about the loan structure. I guess in the end if the monthly payment is worth the entertainment and time spent with family and friends is worth it then I am glad to pay it. I would think some families spend $6000 a year on entertainment and vacations for their families and that's how I kinda look at it. Yes the RV depreciates but the memories never fade away. Thanks again

[rick danger]

I financed my 2015 Octane for 15 years. Its my first rv. Payments are $185 /month. I figure its a pretty cheap way to get into camping, and if I dont like it I wont lose a ton. But the first trip was lots of fun and I'm really looking forward to heading out to the rockies for a month in july with the bikes and boat!

[Plowtoy]

Originally Posted by clubhouse

I have made plenty of bad financial decisions in my life, probably because I didn't have the wisdom you do to ask the community for their thoughts. We have made life decisions to never finance again -- it was a painful 19 months to get out from under all the loans we had, but it’s now been 5 months since we are debt free (except the mortgage on our house) and never have we had better cash flow, security and freedom like we do now. My kids don’t like him, they can’t handle delayed satisfaction yet, but DW and I are very happy we stumbled into the Dave Ramsey plan.

Well said! We too are debt free but the house!! We have been since we got married in '09. Its crazy that it seems like we have more money now that we are living on a writen budget. Hoping to be able to teach our 7mo old Daves ways! Although right now, we have two older vehicles, and a 1997 camper, I know someday (when we reach retirement) we will be all set to see the USA via RV, cant wait!

[troutslayer]

Originally Posted by EricRom

That being said I brought mind trade into the equation and they gave me ACV (actual cash value) of $16500. With putting $4000 down put me right at 70% of MSRP to finance of the 375 which I didn't think that was too bad of a place to be

If you were to purchase a 5th wheel straight up, without a trade-in, the price should be in the neighborhood of 70% of MSRP.

[UPCamper]

Originally Posted by EricRom

It went into the deal backwards as I got a quote from RVOne and took it to a local family owned dealer and they came in within a $1000 of RVOne which I was happy with since it was a lot closer. That being said I brought mind trade into the equation and they gave me ACV (actual cash value) of $16500. With putting $4000 down put me right at 70% of MSRP to finance of the 375 which I didn't think that was too bad of a place to be. I would have no problem doing a 4-5 yr loan on a camper in the mid 20's but at $60k just not doable. The dealer also told me if I sold my unit before the new one came in they would do a courtesy trade so it would save me on taxes and they would only charge the person buying mine doc fees. I know many people spend their money in different ways. Camping is the only thing that we do, I do not have hobbies nor do I drink or have other habits that I spend money on. A friend that we camp with said he would never spend that much money on a camper (they just bought a new one last year for @ $20k) but he spends $250 a month on cigarettes. My wife and have very good jobs, I have been with UPS for 25 years and my wife has been at her job for over 20 yrs as a system engineer. We use our camper at least 8-10 times a year with a trip or two to the beach for a week at a time which in turns saves us a fair amount of money where we used to spend $1500-2000 on a hotel room now we only pay @600 for a campsite at the beach. Thanks for the comments and advice. i will also ask some more questions about the loan structure. I guess in the end if the monthly payment is worth the entertainment and time spent with family and friends is worth it then I am glad to pay it. I would think some families spend $6000 a year on entertainment and vacations for their families and that's how I kinda look at it. Yes the RV depreciates but the memories never fade away. Thanks again

I see you point as a vacation expense and I have felt the same way at times. If you'd spend several grand per trip a couple of times per year, what's the difference if you do this instead.

Nobody can tell you what to do with regards to your personal finances. I think the moral of the whole thread is be careful financing for that long because RVs depreciate quickly and you will be in negative equity for the vast majority of the loan. I'm not saying it's a stupid decision, I'm just saying you will be in that debt until it's paid. Whereas when you mentioned a vacation home, at least you could sell it and get your money back. If you ever get in a situation where you can make the payment, you will have to cover the negative equity to sell it and then you won't get anything back. Good luck. Exciting times and difficult decisions ahead.

UPC

[clubhouse]

Warning I am officially going to rain on your parade!

Troutslayer has a really good point. Regardless of financing, I think you should be able to get a better price than what you shared. 30% off MSRP is possible, often achieved, but 25% off MSRP should be absolutely no issue for you to achieve.

MSRP of $64,500 @ 25% = $48,375 or @ 30% = $45,150
MSRP of $84,500 @ 25% = $63.375 or @ 30% = $59,150

You are talking about financing $50k and $60K respectively after the trade in and down payment. IMO opinion this is not a good deal for you.

On the 314DBS, is there any equity due to you after "ACV" trade-in of $16,500? I really hope so, because $4k is not even in the ball park of a reasonable downpayment for the 5r you are looking at. I don't know where you live, but in most places that isn't even enough to cover the sales tax and title. Your risk meter should be going off so loud that you can't see straight.

We don't know each other, and I have nothing to gain nor lose by you making this deal, but I am seriously concerned. You need to understand there is no way to call this a good financial decision based on the information you have shared so far. I can appreciate the security you feel in your positions, but its not job loss I would be hedging for. Jobs are easy replace; its how you handle a major medical situation, a legitimate housing emergency, putting kids through school, etc.

You can justify the payment by saying we would take X number of trips per year and stay in hotels at $X with out the TT all you want. But you are NOT committed to take those trips. If you things change in you life and you don't take that trip one year, nobody is going to call you for the $. Nobody is going to take anything away from you. You just don't do it.

Think back how different your life was 10-15 years ago. Would you have predicted how your life is today? Can you predict what your life will be like 15 years from now. Of course NOT -- so why commit yourself for that unknown life today, especially for a deprecating liability?

IMO you need to take a very cold shower and stop this fever. Your 314BDS is a very nice TT, with a great family friendly floor plan. I know it well, a new 2014 314BDS was my fever a couple years ago till I took the same cold shower. I ended up with a private party used '12 29QBH, very similar floor plan. It was the last thing I financed before fully committing to a debt free life. I financed $12,000 of the $16,000 purchase price for 48 months and paid it off in 9 mths. Thanks to the Dave Ramsey snowball strategy.

Unless you have been there, you have no idea how liberating no payments are. I wouldn't trade it for anything and wish with all my heart everyone would experience it.

[norty1]

Dave should be everyone's hero. His financial strategy can change your life and life style.
We were debt free when we traded in our last rig. Financed it for 60 months, that sounds better than 5 years, we doubled and tripled up on paying down the principal, even dumped any tax refund into the principal and paid it off in two years.
What a load to be completely debt free. We make car payments to our savings account before the car is bought and then pay cash.
Work towards it and it can change your life!

[canuckowner]

... lots of sage advice given in this thread. And of course it is just that--- advice. The OP has shown humility and courage in asking for it... very few do.

Plenty of folks here have (like myself) experienced the burden of mountains of debt and now know the freedom of a debt free life and are no longer willing to trade that for the promise of gratification from a monthly payment. (Ever notice how dealers (cars, RVs) now only advertise the "monthly" and you need to ask now what the actual purchase price is!?!)

I think most of us posting are 40+. Hard lessons learned from youth. This thread should be required reading before attending any RV show ;-)

"Wise men learn from their mistakes, but wiser men learn from the mistakes of others!"

I think when the OP makes the final decision on this possible purchase and if he goes for it in the end, at least he should be able to negotiate a better deal based on the discussion. And yes, plenty of people have blown far more than 60 or 70K with absolutely nothing to show for it and a new camper is a pretty wholesome place to spend money if you are able to afford it. Just need to step back, do an honest evaluation of finances, and try to leave out the emotion and decide if you really can afford it (not just the "monthly").

[skijlw]

A lot of your decision may be based on your age. I financed for 15 years for 3%. I make a lot more than that on my investments. I am retired so I look at this RV as a lease. Minimum down. I may or may not live long enough to pay for it. If I don't live long enough to pay for it I guess I won't care. If I do or decide to change Rv's I can take the same depreciation hit then as well as I can now except I will have less years to think about it. If you can actually afford the RV or TV use someone's money besides yours if you can.

[canuckowner]

Well said. That is when using cheap credit is wise. When your money is better parked elsewhere. :-)

[troutslayer]

Please PM me on where or with whom you "make a lot more" than 3% on your investments. I think it's time we Jayco people help each other out.

[norty1]

For years there was a program called "Build America Bonds" sponsored by the US government to encourage purchase of municipal bonds. I invested a chunk of my change in them they all pay 5-6.5% interest with very little risk.

[gtsum2]

U Should easily be able to get at least 30% off msrp. I bought a new 2015 for 46% off msrp.